free money from the government

Separating Myth from Fact:
The Truth about Free Money and Grants
for Starting your Business
Message from the State Director
One of the most frequently asked questions we get at the Kentucky Small Business
Development Center is, “Where can I ﬁnd a grant to start my business?” The an-
swer is usually that you can’t ﬁnd a grant for your business. That’s why we created
“Separating Myths from Facts: The Truth about Free Money and Grants for Starting
Your Business.” This guide is meant to provide entrepreneurs with general information
about the few grants that are available and tips on how to decipher between a cred-
ible program and a scam.
All though 100 % ﬁnancing is not available and owner equity is generally neces-
sary, there are numerous loan programs that cater to the small business community.
KSBDC management consultants are highly knowledgeable about different funding
opportunities and would be happy to help you identify legitimate funding sources.
As always, if further assistance is needed, KSBDC consultants are available. We
have been providing one-on-one consulting, training and resources to Kentucky’s
small business community since 1981. We can assist potential and existing business
owners with business planning and the applications needed to get the funds they
desire. We can also help with other management and operational issues such as
strategic planning, marketing and employee retention. Our service centers are located
throughout the Commonwealth. To reach the closest center, contact us at
888-475-SBDC or visit our web site at www.ksbdc.org.
Becky Naugle, Ph.D.
KSBDC State Director
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The Myths
You’ve heard the advertisements that suggest the government will “give” you money to start or
expand your business. Others purport to show you how to tap into the hundreds of millions of
government and foundation grants available to entrepreneurs and small business owners, none of
which ever has to be paid back. And still others claim over 1 million entrepreneurs each year get
free money to start or expand a business.
You’ve probably even considered the legitimacy of these claims because of these promises:
the company guarantees you’ll get a grant or you’ll get your money back
you’ll receive step-by-step instructions on how to write a winning proposal
there are no special requirements and all taxpayers are eligible
you’ll get sample forms and extensive bibliography listings, government and private
foundation source books and publications.
What you’re likely to get is grant information with a catch: the organizations listed don’t usually give
grants to individuals to start or expand their own business. And, you may ﬁnd it difﬁcult, if not
impossible, to collect on the “money back” guarantee.
The Facts
Every business owner would like to have a grant for starting or expanding a business. The fact is
no government agency is handing out free money to start small businesses, regardless of your
gender, ethnicity, or economic status. The harsh reality is that 95% of most small businesses are
started with personal savings, loans from friends or relatives or commercial loans. The owner must
invest their own money and collateral, because 100 % ﬁnancing is not available. The U.S. Small
Business Administration (SBA) does NOT make grants to business owners though it does offer a
wide variety of loan guarantee programs.
Some government grants are available for small businesses but they are designated for very spe-
ciﬁc programs such as:
highly technical areas of industry
schools and training programs
other state and local government programs
For example, the Small Business Innovative Research (SBIR) program offers funding for
small ﬁrms to perform cutting-edge research & development that addresses the nation’s most
critical scientiﬁc and engineering needs. These needs span the technology spectrum — from
aviation and agriculture to medicine and manufacturing. SBIR is a federal government program
administered by 10 federal agencies for the purpose of helping to provide early-stage research
and development funding to small technology companies. SBIR funding is extremely competitive
and has an intensive application process.
Grants that are available address societal problems. There is not a single list of grant providers.
There are literally thousands of private and public funding sources. You can ﬁnd information
about grants at your local library and on the internet for free. Every funding source has eligibility
requirements. If you do not ﬁt the eligibility requirements they will not give you money. Every grant
has required activities, if they are not carried-out, you may have to give the money back.
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Grant Writing
Here are some tips to help if you happen to ﬁnd a grant opportunity that ﬁts what you do.
Identify the right funding source. Grant applications must be responsive to the needs
of the grant agency. You must DO what the agency is funding. This requires research
into the granting agency and its requirements. For example an agency funding
computer research will not fund you to start a retail store.
Get the correct application forms. Legitimate grants normally have an identiﬁed
application process and forms and they do NOT charge you fees to apply.
Follow the application guidelines. Include the required information and meet the
deadlines.
Get help. There are web sites that can give you tips in writing a good grant
application. Many times experts such as accountants or attorneys can add credibility
to the application.
Develop a well-prepared business plan that demonstrates your understanding of the
business. This will help outline how your business will beneﬁt the agency offering the
funding.
Grant Resources
The following are legitimate resources for information about government grants and beneﬁts:
The Catalogue of Federal Domestic Assistance
www.cfda.gov
Resource for identifying types of assistance and writing grant proposals
The U.S. Small Business Administration (SBA)
http://www.sba.gov/services/ﬁnancialassistance/grants/index.html
Federal grant resources
The Foundation Center
http://lnp.fdncenter.org/ﬁnder
Use the Foundation Finder to search by name for basic information about foundations within
the universe of more than 70,000 private and community foundations in the U.S.
Society of Research Administrators
www.srainternational.org/newweb/grantsweb/
Resource for government funding, general research, and private funding
Grants.gov
www.grants.gov
Federal government operated web site that is a source for ﬁnding and applying for federal
grants.
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Protecting Yourself and Your Investment
The Federal Trade Commission offers these tips about grants:
• Be very wary of anyone who promises or guarantees they can get you a grant
particularly if you must pay in advance for the service.
• If you are tempted to respond to one of these offers because of a money-back
guarantee, be aware that they may impose so many conditions it could be difﬁcult to ever
get your money back.
• If you are experiencing ﬁnancial problems and believe you may qualify for some kind of
aid, check with your city or state unemployment or social assistance ofﬁce.
• Check the Better Business Bureau and the state Attorney General’s Ofﬁce for complaints
about a company before sending money.
• Advertising in recognized media outlets or on the internet does NOT guarantee the
legitimacy of the company behind the ad.
• Do not provide sensitive information to someone you do not know.
Here are a few more things to remember about ﬁnding a grant:
• There is no substitution for a good solid business idea. No amount of money will
make a bad business idea work. Do your homework and get good advice to determine
if your idea is worth pursuing with or without a grant.
• If a business idea is not worth pursuing without a grant it probably is not worth
pursuing the grant.
• If it is a true grant opportunity you will be able to ﬁnd an application, guidelines or an
organizational contact. Hearing that a friend of a friend got this grant is no
guarantee that such a grant exists or would ﬁt your business.
• Be very concerned if you are asked to pay to apply for a grant. They normally don’t
work that way.
• The time and effort spent seeking grants can often go a long way in helping you do
the valuable research needed to start a business.
• Don’t rely on money back guarantees without looking at the requirements. They can be
designed so that it is nearly impossible to meet all that is required to get your money
back.
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About KSBDC
Kentucky Small Business Development Center (KSBDC) is a network of centers throughout
the Commonwealth dedicated to growing and improving Kentucky’s small business
community. Our mission is to strengthen Kentucky businesses and create economic growth
by providing excellent management assistance, educational programs and helpful resources
for Kentucky’s small business owners and entrepreneurs.
KSBDC is a partnership between institutions of higher education, economic development
organizations and the U.S. Small Business Administration.
Planning • Consulting • Training
Planning
KSBDC provides valuable tools to help entrepreneurs make informed business decisions
when planning to open a new business, purchase an existing business or expand an
established business. Each KSBDC service center has access to demographic information,
market research, industry proﬁles, sample business plans and a variety of publications
covering numerous business topics.
Consulting
KSBDC offers free one-on-one consulting services. All of our management consultants have
broad-based skills and signiﬁcant experience as business owners and/or managers. Our
consultants are qualiﬁed to answer questions and address a variety of topics, including:
• Developing a Comprehensive Business Plan
• Analyzing Cash Flow and Financial Projections
• Market Planning and Research
• Managing Human Resource Issues
Training
KSBDC offers an intensive schedule of affordable training workshops designed to provide
start-up and existing business owners with the knowledge required to maintain and expand
a successful business. A listing of training workshops currently being offered throughout the
KSBDC Network is available by visiting www.ksbdc.org. Numerous self-paced on-line training
courses are also accessible on our web site.
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Funded in part through a cooperative agreement with the U.S. Small Business Administration. All opinions, conclusions or recommen-
dations expressed are those of the author(s) and do not necessarily reﬂect the views of SBA.
Kentucky Small Business Development Center
Locations
888.475.SBDC (7232)
www.ksbdc.org
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888.475.SBDC (7232) www.ksbdc.org